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Procurement and Supply Chain Management

Name
Professor
Institution
Course
Date
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Contents

Executive Summary...................................................................................................................3

Introduction................................................................................................................................3

Management of the Procurement and Supply Chain..................................................................3

Leading Stakeholders to Achieve Change.................................................................................6

Developing Individual and Teams in Procurement and Supply.................................................8

Developing Leadership Capabilities to Improve Procurement and Supply.............................10

Conclusion and Recommendation............................................................................................12

References................................................................................................................................13
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Procurement & Supply chain Management/ Leading Stakeholders to Achieve

Change /Developing Individuals & Teams in Procurement & Supply / Developing

Leadership Capabilities to Improve Procurement & Supply

Executive Summary

In the past few decades, the Procurement and Supply Chain Management has undergone

significant evolution as it is currently recognized as one of the essential departments in

energy operations. Companies dealing with Oil and Gas perform in complex and dynamic

environments that are continually facing challenges primarily concerning demand and supply.

Therefore, it is significant that the most cost-effective and efficient supply chain strategies are

implemented considering the volatile business environment that Oil and Gas businesses

operate. The objective of this paper is to come up with a category management process for a

product that Dragon Oil Company (Dubai) will develop. Four main areas will be discussed;

supply chain management and procurement, leading stakeholders to achieve change,

developing individuals and teams in procurement and supply and developing leadership

capabilities to improve procurement and supply.

Introduction
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In any organization, the procurement department is one of the most significant sectors as it

touches and manages its finance. Whether it is a procurement for inventory purchasing or

business continuity, if an organization lacks a clear procurement process or has a strategic

approach, its spending can get out of control hence become damaging. An organization must

adopt new strategies to meet business goals and objectives as the supply chain is continuously

disrupted by factors within and outside the organization. As I lead a procurement and supply

team at Dragon Oil Company (Dubai), we will adopt a category management process that

effectively attains the company's objectives. For the confidentiality of the product and the

supplier, we will refer to the product as ''Product X'' while the supplier as ''Supplier Y''. Being

an international business, serving millions of consumers worldwide, the company has a very

competitive business environment (Lu et al., 2019). The category management process will

cover four aspects of the procurement and supply chain; supply chain management and

procurement, leading stakeholders to achieve change, developing individuals and teams in

procurement and supply and developing leadership capabilities to improve procurement and

supply.

Management of the Procurement and Supply Chain

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First, we must evaluate the right supplier that meets the needs of the organization; therefore,

we must assess the sources of competitive advantage and added value. For effective

procurement and supply chain management (P&SCM), a change must be implemented on

one of these categories; strategy, infrastructure, or the process. Dragon Oil Company is a big

company; the change will be implemented in the process category. A functional procurement

system entails ten steps; determining requirements, analyzing the supply market, determining

the procurement strategy, contract preparation, sourcing, bid evaluation and negotiation,

contract award and transition, contract management, performance measurements, and process

review. However, for an effective procurement process, we will reduce these steps to six to

suit our e-procurement system and will entail sourcing, tendering, auctioning, ordering, and

information and all these steps will be done electronically. Therefore, the e-procurement

process will include requirement definition, sourcing, soliciting, evaluation, contracting, and

contract management.

Figure 1 Six Forms of E-procurement

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The implemented change has several added values: reduced risks in the supply chain,

decreasing prices and cost, reduced timescales, improved service to customers, improved

product quality, reputation through a sustainable supply chain, and better compliance to

regulations. With a direct procurement and supply chain, it is significant that the network is

mapped to allow for the identification of the point of risks, process complexity, cost, profit

and opportunities, and sources of non-value adding activities as well as process

ineffectiveness.

The implementation of P&SCM, particularly e-procurement, carries certain risks. Any

organization can get ruined through these five fundamental ways; increasing costs, losing the

market, losing the competitive advantage, creating bad press, and disturbing supply. In

particular, when procuring business electronically, the risk of unexpected liabilities such as

computer virus, confidentiality breach, software non-compatibility, and unethical practices

may arise. It can only be mitigated through continuous improvement of the platform being

used as well as keeping up technology being used as it is continually changing.

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According to Upadhyay et al., (2018), Dragon Oil Company's P&SCM lies on a long-term

strategy of a simple win-win proposition. It is crucial to have a collaborative and competitive

approach in procuring from ''supplier X''. Suppliers with a similar long-term vision as our

organization will be given more consideration. This will cultivate an atmosphere of trust and

openness, enabling working together and innovate to keep costs as low as possible. Our

strategy is supported by Peter Kraljic Purchasing Model that entails thinking through the

supply chain from end to end to build relations with suppliers, ensuring an optimized lifetime

cost and long-term supply security. This model has four fundamental steps: classification of

purchase, analysis of the market, having a strategic position, and action planning. Thus, we

will start by classifying all the goods and services that we will procure according to each

potential profit impact and supply risk. Then we will investigate the buying power we have as

an organization and how much power the suppliers have. Then we will use a purchasing

portfolio matrix by classifying the product identified as ''strategic'' during purchase

classification, based on the buyer and supplier power. The following matrix will be used;
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Figure 2: Purchasing Portfolio Matrix

The supply chain of our organization is a multifaceted system of both direct and indirect

suppliers; hence, it is essential to have sustainable global sourcing. We will focus on ethics

by ensuring the safety, welfare, and health of the people. Particularly, as an oil and gas

drilling company, several dangers come with it. Hence, our workers are provided with

protective gear while having standard plant operations. More so, the risk of price fluctuations

of oil and gas is also a major risk to the suppliers. This can be managed by balancing supply

and demand in the market.

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Technology and Innovation is an essential aspect of P&SCM. With the fast-changing

technology and a competitive business environment that we operate, we will create an

automated supply chain and an upselling process with real-time data. The chain will be

majorly based on the customer's decisions and goes all the way to operational, strategic, and

tactical decisions. The cross-functional working approach will be used as teamwork across

departments is encouraged. Since our procurement is typically based on the consumers'

needs, cross-team collaboration is vital in bringing together people from various departments

with different expertise, knowledge, and experience. This 'working-interdependently' will be

facilitated by a fast and efficient electronic platform that synchronizes all the data.

Performance measurement aims to compare actual results with pre-set targets. Therefore, it is

significant that the effectiveness of a procurement and supply chain is measured. There are

different levels of performance, and it entails strategic, tactical, and operational. For a

thorough analysis of the model, the sand cone model will be used. Cost efficiency, speed,

quality, and dependability are evaluated. This model's application requires tolerance and

patience, as it is a long-term approach (Ferdows & De Meyer, 1990).

A functional P&SCM entails controlling prices and costs as it accounts for a high proportion

of costs across various sectors. After evaluating the costs of purchases, we will develop a

model that will allow for the distinction of our supplier's prices. It is crucial that there is a

win-win situation for both the supplier as well as the organization. Therefore, the considered

pricing and cost of commodities and services must be fair to both parties.

Leading Stakeholders to Achieve Change

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For successful collaboration with stakeholders, corporate, business, and functional strategies

have to be evaluated. Corporate strategies set the overall goals of the company, business

strategies set the purposes of a business unit, while functional strategies set goals in attaining

corporate and business goals. These strategies have to be evaluated one after another. Our

proposed change to the P&SCM will significantly contribute to the organization's strategies

through brand development, offer reliability, and increase the speed of delivery.

For a consistent chain in procurement and supply, its vision must collaborate with that of the

business as a whole. In coming up with one, we will develop a vision by engaging the

stakeholders. In the long run, it will articulate one that resonates strongly and motivate

suppliers to act. In setting our vision, three fundamental themes will be its basis; setting clear

business rules and automating them, focusing on data analytics science, and continuously

shifting the mind-set. Dragon's vision focusses on safely exploring oil and gas resources by

having a talented workforce and leveraging technology. Our P&SCM vision must be in line

with this vision. With the win-win aspect, our vision statement will be ''to engage with

suppliers in a friendly environment that appeals to price consciousness''.

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Organizations that understand the role of power in P&SCM easily use their insights to

prevent problems and translate their knowledge into a competitive advantage. French and

Raven (1959) identified five types of power; coercive, reward, referent, legitimate, and

referent. In analyzing power, we will discuss three variables that are significant aspects of

supply chain integration; information sharing, relationship commitment, and process

coordination. There is a massive power in how information is being shared. It is both a

technological issue and a managerial issue in the supply chain. For a shared power, a vertical

information sharing system will take place hence allowing for real-time connection across the

supply chain. Therefore, power-sharing will be enabled through the implementation of the

Andrew Cox power and dependency matrix. It provides a framework on how Dragon Oil

Company will reduce its dependency on ''supplier Y''.

A buy-in between the organization and ''supplier Y'' is important in creating a mutual

agreement. To foster a relationship, as the team leader, I will build rapport with ''supplier Y''.

Since the procurement process will be virtually done, it is important to build rapport mainly

through tone and professional communication. As a leader, Boddy and Buchanan's (1992)

aspects will guide me in the right direction (Boddy & Buchanan, 2018). I will manage the

team, manage the staff, manage up, and manage across. However, specific difficulties may be

expected, such as practical difficulties in managing information flow, organizing meetings,

lack of clear authority in the horizontal structure, and problems attributed to a dual authority

structure.
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Communication is key in the P&SCM as it is the main component that connects the

procurement team with ''supplier Y''. The intranet will be used within the organization while

the extranet will communicate with ''supplier Y'' and other stakeholders. Our communication

plan is to use emails and dropbox. These forms are quick and efficient to use. Considering the

company's size, managerial changes will adopt the incremental change where small steps will

be made over time.

Cultural acceptance is significant in implementing these changes. Johnsons Cultural Web

approach will be used to look at the changing culture within the organization. By evaluating

these six paradigms, it is possible to see the bigger picture, and whatever is not working is

changed; stories, symbols, rituals and routines, organizational structure, control systems, and

power structure (Balogun & Hope, 2005). Generally, all these aspects have been working

efficiently for our business, and no changes will be implemented.

Developing Individual and Teams in Procurement and Supply

Organizational behaviour is the study of the functioning, structure, and performance of

companies, as well as the behaviour of individuals and groups within it (Buchanan &

Huczynsk, 2019). P& SCM brings people from different spheres, hence the significance of

understanding the concept of personality. There are four personality types, according to

Eysenck; sanguine, choleric, phlegmatic, and melancholic. These personality traits will be

identified using the idiographic approach in psychology, focusing on individual feelings and

insights. With the win-win aspect of our P&SCM, this theory will contribute to the element

of self-understanding, which is primarily developed through social interactions.

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To master people's behaviours, it is important to understand different learning styles. David

Kolb's approach of the learning styles will be used as it works in two levels; a four-stage

cycle of learning and also four different learning styles. The basis of this theory is on the

acquisition of knowledge through the transformation of experiences. It is a cycle of four

stages; conceptualization of the abstract, dynamic experimentation, reflective observation,

and real experiences.

Figure 3: Kolb Learning Styles

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Diversity and inclusivity are two important aspects of procurement, and they contribute to a

broader mix of suppliers. In P&SCM, diversity has several benefits; improving image brand,

widening the recruitment pool, and enhances flexibility. Furthermore, as a leader,

acknowledging diversity among the team is also crucial.

While fulfilling the organization's objectives as well as the P&SCM visions, job satisfaction

must be considered by mainly increasing employee commitment through caring for

employees, exercising more effective leadership qualities, and introducing a reward system

(Armstrong, 2009). Developing an attainable job design will contribute to job satisfaction

where the most effective ways of performing tasks are outlined. As part of a suitable work

environment, recruitment, selection, and training are significant components. Seven steps will

be implemented during external recruitment: searching the required database, making the

advertisement, referrals, and networking, compiling the applicants, submissions and carrying

out interviews, getting feedback, and retention (Taylor, 2014). To attain diversity in the

process, e-recruitment will be used. It provides several benefits such as improved

transparency, improved candidates' experience, reduced cost used, decreased time-to-hire,

and improving compliance. (Gawel, 1996).

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When a diverse group of people works together, conflicts are prone to happen. To resolve

them, we will implement the Thomas and Kilmann's conflict-handling styles. This conflict-

handling mode will be adopted due to its popularity as it describes how each conflict mode is

essential in dealing with differences in certain situations. There are five modes of this model;

competing, avoiding, collaborating, accommodating, and compromising. The collaboration

component of this model combines being cooperative with being assertive. When a problem

is identified, the solutions that must be implemented should satisfy everyone's needs and

concerns. Hence, each party gets what they want. Unlike the previous style, the competing

technique entails being uncooperative and being assertive. The Avoiding style entails

avoiding conflict by diplomatically side-lining an issue or getting rid of the threatening

situation. The accommodating style is the opposite of competing, where there are components

of self-sacrifice. While it seems like a generous approach, this style often takes advantage of

the weak, thus causing resentment. Finally, the compromising style leads to mutually

acceptable solutions, where both parties sacrifice certain aspects (Thomas & Kilmann, 1974).

Developing Leadership Capabilities to Improve Procurement and Supply

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Leadership has direct impacts on a procurement and supply chain. Leadership can be seen as

an interpersonal process when people are made to work or follow willingly. Also, it can be

exercised as a position that an individual holds in an organization. Leadership and

management are often mistaken to be similar, but in essence, they are different. The

significant difference is that managers make people work for them while leaders have people

who follow them. Dragon Oil Company is a global organization; it is important to master

both concepts. As a manager, I will plan and budget, control and solve problems, and

organize and staff. As a leader, I will communicate the P&SCM vision, develop a sense of

direction, Energise, inspire, and motivate. Managers wear many hats, and the Mintzberg

model will help in evaluating their roles, interpersonal roles, information roles, decision roles

(Mintzberg, 1989).

Are good leaders born or made? This is a common question yet very complex. Trait theory is

a component in psychology, which is a significant approach to studying human personality.

Leadership traits can, therefore, be identified using this trait. A good leader can be depicted

through some of these traits; self-confidence, emotional stability, strong desire to achieve,

ability to solve problems, and several others (Handy, 1976). Depending on circumstances,

leadership styles vary; hence no single model is always applicable. Therefore, in identifying

leaders, the style theory will be used. This model focusses more on what leaders do (Kotter,

2008). Both of these theories are centered on two distinct behaviour types; relationship

behaviour and task behaviour. With these considerations, Blake and Mouton ran with this

idea to create a model of training leaders by plotting leadership traits behaviours on two axes;

tasks and people are the primary concerns. As indicated in the diagram below, there are five

main plots on the managerial grid, and it comprises impoverished, a country club, task

management, team, and finally, the middle of the road.

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Figure 4: Blake and Mouton's leadership Grid

Furthermore, the behaviors of effective leadership that would lead to a functional

procurement and supply chain are vital. Servant leadership is advocated by House's theory,

where leadership is not viewed as a position of power rather a coach to subordinates. Based

on this model, there are four types of leadership behaviours; achievement-oriented leadership,

directive leadership, supportive leadership, and participative leadership.

Delegation of responsibilities is a key aspect of leadership. According to Mullins (2007),

delegation is the process of entrusting responsibility and authority to others; thus, the creation

of a significant manager-subordinate relationship. The benefits of the delegation include

improved distribution of work and efficiency and employee empowerment. (Mullins, 2007).
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To improve productivity, employees must be motivated. Several theories can motivate

employees, and the most applicable one for our team in the P&SCM process is Maslow's

Hierarchy of Needs theory, which was coined in 1943 by Abraham Maslow. It emphasizes on

satisfying the most basic needs for the employees to get motivated to achieve higher-level

needs. They are five levels; psychological, safety, sense of belonging, esteem, and self-

actualization.

Figure 5 Maslow's Hierarchy of Needs

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Most people spend most of their daily hours at their workplaces, and constructive behaviours

help in dealing with frustrations. Constructive behaviour may lead to restructuring and

problem solving, while destructive behaviour may lead to regression, aggression, withdrawal,

and fixation. The performance review is key in tracking the progress of ''supplier Y'' and well

as customer reception of ''product x''. Performance can be managed through reviews and

appraisals, preparation of development plans, and preparation of performance contracts. The

Michigan Model will have implemented as it has four steps; selection, appraisals and

performance management, rewards, and development (Fombrun, 1979).

Conclusion and Recommendation

In conclusion, this new category management for the new ''Product X'' as going to be

successful as various models and theories of the procurement and supply chain have been

considered. Four components have been thoroughly analyzed; procurement and supply chain

management, developing leadership capabilities to improve procurement and supply, leading

stakeholders to achieve change, and developing individual and team procurement and supply.

In future research, I would recommend evaluating a real product in the market to provide

real-life experience into the category management process.

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